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Useful Thoughts To Counter Fear

  
  Education
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fear-12– Losses are a simple cost of doing business
– Since you always limit your lose to an amount of your account can withstand, there is nothing to fear.
– You have the courage to do whatever it takes to succeed at trading
– Each Trade is but one of many
– You keep your focus in the present because this is where the action is
– The potential profits are worth the risk
– Trading is about money, it’s not about your survival.
– Trading is only one way in which you can make money.
– You learn and grow stronger with each trading experience
– The future of your trading is bright.

Mark Cuban’s post mortem on Facebook

  
  Education
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His latest take on the facebook IPO is here. His points are in bold.

1. Say goodbye to the individual investor on Wall Street. Mr. Cuban argues that because the media hyped the FB IPO that Wall Street is to blame. OK, I agree the IPO was hyped. But is that Wall Streets fault? Isn’t it the media’s fault? Isn’t it the buyers fault for not doing their due diligence? Didn’t Morgan Stanley spend millions propping up the stock the first day?

No one has long term success by reading any single piece of media, especially without knowing the writers intentions.

Here is a brief explanation on how the market works. If there are more buyers than sellers it goes up or vice versa. Or more important right now, if they have the means to buy.

2. The Valuation Bubble in Silicon Valley is bursting – but not for the reasons you think. The idea of private investment seems great but the execution is far off. The value of any market is liquidity. That has to be one of the important factors when making an investment. You know why futures are gaining popularity and what will eventually lead to their demise? A central market place and the lack thereof. Their spawns will kill the market and liquidity. The less central a market place the more likely the forces within that market are able to take control.

Mark agrees with me on liquidity but my interpretation is that he makes an argument against his point not for it. Didn’t the public market do a much better job at pricing? Didn’t the private market fail more dramatically than the public is this case? (Some one that knows the details better than I, when they went public did private shares get converted 1 to 1? If it did not get converted 1 to 1 let me know and I will gladly change it)

I believe Shark Tank is a great reason why Wall Street will always exist. I do not feel bad for the euntrepreuners and or the Sharks. Each assume the other person will add value. Wall Street assumes the same thing but to more people But as Mr. Cuban already knows, not everyone can win. But would they do better if there were 10 sharks or 100 sharks? Would more companies get funded?

If you allow people to be stupid, they will continue to be stupid. Howard Lindzon wrote a post as well that I disagreed with on the basis of access. They are both a lot more successful than I so I could be wrong. Also both of those guys should know that you are more likely to get screwed privately than publicly. I think this might be changing but it hasn’t yet. Open is not bad, closed is not bad, bad is bad. Liquidity and cash is always king, deeper markets should lead to better pricing. (more…)

Finicky Traders are Good Traders

  
  Education
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In trading focus is crucial. You have to know who you are as a trader and exactly what your method and trading plan is, and you must follow it.  In trading discipline makes money, focus makes money, monster stocks make money, while risk management allows you to keep the money that you have made. You could say you must be finicky  to be a good trader.

Here are the areas to be finicky about:

  1. A good trader is picky about the methodology they decide to trade, they study diligently to see what works  before they begin trading.
  2. Be very picky about the stocks you trade, only trade the very best monster stocks long and only short the absolute biggest junk stocks.
  3. Being picky about your entry point is crucial, stick with your plan, buy only when the odds are in your favor for winning.
  4. You can not just trade any amount of stock, you have to be picky about the quantity of shares you trade and base it on your risk management guidelines.
  5. Be very picky about who you follow on twitter, look for a teacher not a stock picker, beware of big egos. (more…)

Stock options are for..

  
  Education
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  1. …managing risk through controlling shares with less capital.
  2. …putting the odds in your favor.
  3. …making bets on volatility or a price inside a specific time frame.
  4. …insuring a longer term stock holding from major losses.
  5. …replacement of margin.

Stock options are not for…

  1. …gambling.
  2. …going all in on one trade.
  3. …being used if you do not understand them completely.
  4. …selling and taking on unmanageable risks.
  5. …trading with the odds against you.

12 Keys of Successful Traders

  
  Education
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  1. Their entry parameters have a historical edge that gives them a real probability of profitability.

  2. They are profitable becasue their winning trades are bigger than their losing trades over long periods of time. This is either due to a high winning percentage or really big wins when they are right.
  3. The successful traders know how to exit with a profit while it is still there.
  4. Successful traders are not stubborn they flow with the market price action.
  5. Successful traders winning trades can be as big as the trend will allow but their losses are strictly limited to a very small percent of their trading capital.
  6. Traders that trade the math and not their emotions are the ones that make money in the markets.
  7. The traders that limit their total risk exposure at any time do better over the long term. Big draw downs are very difficult to come back from. (more…)

16 Trading Quotes -Must Read & Take Print Out

  
  Education
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“The obvious rarely happens, the unexpected constantly occurs.” – Jesse Livermore

“A speculator is a man who observes the future, and acts before it occurs.” – Bernard Baruch

“What seems too high and risky to the majority generally goes higher and what seems low and cheap generally goes lower.” – William O’Neil

“Successful speculation implies taking risks when the odds are in your favor.” – Victor Sperandeo

“Stocks are bought not in fear but in hope. They are typically sold out of fear.” – Justin Mamis

“Accepting losses is the most important single investment device to insure safety of capital.” –Gerald M. Loeb

“To me, the “tape” is the final arbiter of any investment decision. I have a cardinal rule: Never fight the tape!” – Martin Zweig

“You have to master your ego & realize that being profitable is more important than being right.” – Martin Schwartz

“Losing a position is aggravating, whereas losing your nerve is devastating.” – Ed Seykota (more…)

Trading With A Plan

  
  Education
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A planned trade is one that is guided consciously, filtered according to a variety of criteria that are designed to provide a positive expectancy. The opposite of a planned trade is an impulsive one, in which traders enter markets before explicitly identifying what they are doing and why. The difference between planned and unplanned trading is one of intentionality: being proactive in taking controlled risks vs. being reactive to what has already occurred in markets. Even the most intuitive and active trader can trade in a planned manner, if many of the elements of planning are achieved prior to entering positions.

So what are these elements of planning? The ideal trade identifies:

1) What you’re trading – Why are you selecting one instrument to trade (one stock, one index) versus others? Which instruments maximize reward relative to risk?

2) How much you’re trading – How much of your capital are you going to allocate to the trade idea versus other ideas?

3) Why you’re trading – What is the rationale for the trade? Why does the trade idea provide you with an “edge”?

4) What will take you out of the trade – What would lead you to determine that your trade idea is wrong? What would tell you that the trade has reached its profit potential?

5) Where you will enter the trade – Given the criteria that would take you out of the trade, where will you execute your idea to maximize the reward you’ll obtain relative to the risk you’ll be taking?

6) How you will manage the trade – What would have to happen to convince you to add to the trade, scale out of it, and/or tighten your stop loss? (more…)

Trading Wisdom

  
  Education
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“When in doubt do nothing.  Don’t enter the market on half convictions; wait till the convictions are fully matured….. And so, whenever we feel these elements of uncertainty, either in our conclusions or in the positions we hold, let us clean the house and become observers until as that eminent trader Dickson G Watts wrote, “The mind is clear; the judgement trustworthy.”
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